Should we give incentive bonuses to Wall Street Watchdogs?

I have fixed feelings about this, and I will explain why a little further down.

An Article in the New York Times Dealbook Column asks a question whether Wall Street Regulators or Watchdogs should get performance bonuses.

Maybe someone deserves a bonus.

Like someone who sniffs out the next Bernie Madoff. Or jousts with tomorrow’s gonzo bankers. Or defuses the Next Big Crisis in whatever Next Big Thing is dreamed up by Wall Street.

Someone, in short, who regulates.

It is clear that the nation’s financial regulators were no match for Wall Street last time. The financiers were always one step ahead. But maybe that isn’t surprising. The financiers, after all, have a big incentive to outsmart the financial police. It is called a bonus. Wall Street lures a lot of bright minds with money. How can federal agencies compete? They can’t.

So, of course, The Government of Singapore’s head honcho says we ought to incentivize watchdog process.

Tony Tan Keng Yam, deputy chairman and executive director of the Government of Singapore Investment Corporation, suggested that one reason American regulators fell down on the job was that they were paid too little.

“You must have as good people working in the government in the regulatory authorities as those that are working in the private sector,” Mr. Tan said. “You do need, particularly in these very difficult times, capable people in central banks, in government, in the Treasury who can effectively supervise.”

Mr. Tan knows about this firsthand. He is a former regulator himself, and Singapore has a different view about compensation.

“We pay our politicians and our government servants very well,” he said. “We lock remuneration to the market.”

While Singapore’s watchdogs aren’t paid enough to afford private planes, some in top positions make seven-figure salaries.

At first blush, this would seem to be a great idea; however, if you think about it closely, this would not be such a good idea. Because of the following:

Some at Davos thought the bonus idea could work. But anxiety over that approach was palpable. “They already treat us like criminals,” one hedge fund manager said.

A few said giving bonuses to regulators would be like giving bonuses to the police for issuing speeding tickets. Maybe the regulators, like Wall Streeters, would start thinking about the money, rather than what is right. But maybe that’s exactly what Wall Street needs to slow down.

I must say, that I highly disagree with this idea. Why? While I believe that moderate regulation is a good idea on Wall Street; I believe that incentivizing the Wall Street watchdog process will result in a overzealous regulatory process, that will be solely based upon monitory compensation. This would be absolutely disastrous to the free market process in America. As well all know we already law enforcement that borderlines upon a police state. Doing this to Wall Street would cause a fear mentality amongst the financial sector and discourage investment.

We need regulation, not a financial police state.

Japan's Economy on the verge of collapse as well.

Russia is not the only one. Japan now is on the verge of collapse as well.

A reader chided me for not making note of the truly dreadful factory output figures released last Thursday, which showed a fall of 9.6%.

I have to confess that I have fallen into “Japan bad news” syndrome, in that I expect bad news out of Japan and therefore did not focus enough on the details. And while I do not aspire to covering every financial news story (that’s what the MSM is for), the latest figures paint a grim picture, even by our new, desensitized standards.

It wasn’t simply that December was truly awful, but it came on top of a nearly-as-bad November

via naked capitalism: Veneroso: Japan on the Edge of the Abyss.

Again, this is what happens when you inflate a money supply and create a bubble.

Yves continues:

Yves here. I only get the privilege of reading Veneroso now and again, but I cannot recall him taking a tone remotely like what follows:

I have been writing about an Asian black hole for almost two months now. I have been crying from the rooftops about an emerging depression in Japan. It has been as though a neutron bomb had gone off in the world. There was no one who seemed to notice, no one who seemed to listen.

Every week it gets worse and worse and worse. Today it was Japan….

THERE HAS NEVER BEEN DATA THIS BAD FOR ANY MAJOR ECONOMY – EVEN IN THE GREAT DEPRESSION. December industrial production came in down 9.6%, worse than the METI forecast. It is now down almost 21% year over year. METI forecasts a further 4.7% decline in February. The inventory to production ratio soared again. Maybe METI will be correct.

If it is, Japan industrial production will have fallen 28% (non annualized) in four months. It will have fallen by a third in about a year. Nothing in the history of major nations compares. A 28% decline in four months would be more than half of the entire decline in U.S. industrial production over the 3 years and nine months of the U.S. Great Depression.

It would be a greater decline in four months than in any 12 month period in the Great Depression in the U.S. We are literally looking at the unimaginable. (I am attaching the U.S. industrial production index from the Great Depression for comparison).

IT’S A DEPRESSION IN JAPAN – ALREADY – PURE AND SIMPLE.

If this is true, unless President Obama can pull some sort of a miracle out of his rather skinny ass. We are in deep trouble. The reason I say this is because we are in a Globalist Economy, whether we like it or not, and Japan’s failures are our failures as well.

I think it will get much worse, before it gets any better. 🙁

(Via Freedom’s Phoenix)

Toyota is feeling the pinch too.

So much for that stupid Neo-Con line saying that the slump in auto sales is the automakers fault.

Via the New York Times:

TOKYO — Toyota Motor will idle its plants in Japan for 11 days in February and March to reduce output in the face of steeply declining global vehicle sales, the company said Tuesday.

The Japanese auto giant said the suspension would affect production at all 12 of its directly operated domestic plants, which include four vehicle assembly plants and also factories that make transmissions, engines and other parts. The closings are in addition to a three-day shutdown this month at these plants that Toyota had already announced.

The move is unusual for a company that just a few months ago seemed unable to keep up with voracious global demand for its fuel-efficient vehicles. But even strong players like Toyota have failed to escape the drastic slowdown in the global auto industry.

The company said it would idle the plants to reduce stocks of unsold vehicles amid a relentless slide in sales, particularly in the United States, its biggest market. Last month, Toyota’s sales there dropped 37 percent, a larger decline than at its struggling American rivals General Motors and Ford.

Plunging sales and a stronger Japanese yen, which reduces the yen value of overseas profits, forced Toyota to forecast last month its first annual loss in 70 years at its vehicle-making operations.

Toyota did not say how many vehicles would be affected by the suspension announced Tuesday. The company said its four domestic assembly plants produced 1.5 million vehicles in 2007, the most recent year for which the company has figures. Toyota-brand cars are also made by other companies in the Toyota group.

The company had already announced that it would shut down truck production at two United States plants for three months

Its American rivals — General Motors, Ford Motor and Chrysler — have also idled plants across North America in response to the slowdown.

For once, I am in agreement with a Liberal, and yes, it is the same knuckle-headed liberal that insulted Conservatives. Hey, I am one that praises when it’s due and bitches when it’s due too; At least I’m fair. 😉 😀 😛

Matthew Yglesias Weighs in:

This is the conceptual problem with efforts to “save” the car industry through bailouts or union busting or whatever you like. One assumes demand for cars will get higher than it is right now, but the industry has a whole just has more capacity to build cars than there is demand for new cars. Which is fine. When you look across the developed world and try to take stock of the medium- and long-run problems facing the OECD nations there’s just no way you’re going to reach the conclusion that an automobile shortage is a big concern. But obviously it’s not fine for the companies that make cars. There’s going to be a need for some shrinkage.

Yeah, I know, most likely some of the Conservatives who are basically scraping my blog for content are going to try and deride me as a fake conservative, because I stick up for the middle class and because I happen to be the son of retired General Motors Worker and U.A.W. member. Well, I got two words; screw you and the rest of the asshole Madison Ave. Conservatives. 😡

Anyhow, I happen to agree with Matthew here, I live here in the Detroit Area. If the auto industry dies, so does this area. That will cause my parents to suffer, they need the health insurance, as they are both diabetic and the amount of medications that they take is staggering. Anyhow, this article above disproves and basically strikes down the “Meme” that was going around in the Conservative Blogosphere that the issues with the auto industry was the fault of the automakers. Which I totally dismissed as abject bullshit of the highest order. It was the fault of President Clinton for putting pressure on the loan companies to give those toxic subprime loans to those who were considered high risk. That is what started this whole thing. Of course, equal blame can be given to the Republican Congress of 2003 for not changing the laws, after all, they were warned by the Bush White House to do something; and they did nothing at all.

Best thing they could do, was have a hearing, of which the CEO of Freddie Mac pulled the race card, and congress backed off. So, all the blaming of the Auto Companies was nothing more than a feeble attempt by the Republicans at scapegoating the wrong damned people.

Here’s hoping that Japan’s auto industry totally collapses and people, both American and otherwise, have to buy American products, for a change!

Funny Video: Sponsor an Executive

This was sent to me by the smartest Democrat I know………………My Mom. 😀

The Automotive Bailouts: The Other Side of the Story

I have been sitting here, trying to keep out of this. But I have sat and looked at the Republican and Neo–Conservative Spin on this Story and I’m sick of it. 😡

So, I am giving you, the other side of the story, from the horses mouth; without commentary from me.

I did not ask that you agree, I simply ask that you listen and hear this man out. Now I am almost sure, that the Blogs, that I have linked to, will remove my trackback, like the Neo-Con Fascists that they are. I mean, it is all about controlling the message with those guys. 🙄

Here we go:

Part 1:

Part 2:

Media Q & A:

Media Q & A Part 2:

Media Q & A Part 3:

There you have it. The other side of the story. You decide.

(Source UAW.ORG)

Let's Boycott Alabama

It seems that there is a grassroots effort to get a boycott Alabama, in response to the Alabama Senator Richard Shelby’s attempted stonewalling of the bridge loans to the Big Three. Well, it’s big two now, Ford will not be needing the help.

Anyhow, here is a e-mail written by my Mother, who is a spouse of a retired General Motors worker.

Senator Shelby,

I doubt that you read the emails sent to your office but perhaps it will be read by someone who will show you the many emails you are sure to receive, and will point out to you just how wrong you are. There are a lot of derogatory comments that could be made but I prefer to try to point out a few facts that you evidently have not wanted to know. My husband and my father are both General Motors retirees and I know firsthand from where I speak.

Perhaps you think the auto workers are wealthy, making that mysterious $75 an hour that has been bandied about in the media. Unfortunately that is very far from the truth. They have never made that much, even including benefits, and most of them live from paycheck to paycheck trying to make ends meet like most middle class people. If the auto companies go bankrupt as you desire, not only will the auto workers lose their jobs, but also jobs directly and indirectly connected, such as suppliers, stores and restaurants located near the plants and of course it will trickle down to the cities who will lose the tax revenues these plants produce. We are not only talking about Detroit and Michigan but every state that has a plant or plants belonging to the Big 3.

It’s odd to me that you think that two companies that have been in business for over 100 years and one that is over 83 years old do not know what they are doing. If this is true how do you explain the fact that they sell over 50% of the cars purchased in the world and have won many, many multiple awards over the years for their cars? Do you perhaps think that people are just too stupid or uneducated to realize they are buying an inferior product? And the award givers are too dumb to realize they are giving an award to a poorly built, not very innovative dinosaur? Maybe you need to voice that opinion in your next media interview. I’m sure people would be interested to hear it.

You need to come out of your office and meet with the GM, Ford and Chrysler workers themselves. Could you really look them in the face, knowing they have families to support and bills to pay and tell them you think they should join the ranks of the unemployed? Do you think it is their fault that the economy has taken such a downturn because of mismanagement on Wall Street, the banks and yes, the government?

The auto companies and the union are trying their best to jump through all the hoops the Congress is throwing at them, as ridiculous as some of them are. To let them go under will cause a depression like this nation has not seen in many years. I hope you think long and hard about that.

By the way, I fully support the boycott of your state.

Y’all see where I get the writing skills from? I was told that I could post that, as long as I did not sign her name.

Anyhow, if you’d like to join the grassroots effort boycott Alabama. Please go to the Official Boycott Alabama Page.

Well, they did call them "High Risk" Loans…

Seems that the people that defaulted on their mortgages, have defaulted again, even after all this aid that has been tossed around. So reports Reuters:

Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said on Monday.

“The results, I confess, were somewhat surprising, and not in a good way,” said John Dugan, head of the U.S. Office of the Comptroller of the Currency, in prepared remarks for a U.S. housing forum.

“Put simply, it shows that over half of mortgage modifications seemed not to be working after six months,” he said.

Dugan said based on data collected from some of the biggest U.S. institutions, like Bank of America, Citibank and JPMorgan Chase, home foreclosure starts fell 2.6 percent in the three months ended in September.

However, data which is to be issued by the OCC and the Office of Thrift Supervision (OTS) next week could throw cold water on a push by some U.S. policymakers for loan modifications as the key remedy for the ailing U.S. financial and economic crisis.

Dugan said recent data showed that after three months, nearly 36 percent of borrowers who received restructured mortgages in the first quarter re-defaulted.

The rate of re-default jumped to about 53 percent after six months and 58 percent after eight months, Dugan said, without providing an explanation for the trend.

Regulators speaking at an OTS-housing forum did not provide any explanations for the causes behind the data.

“We don’t know the answers yet, but these are the types of questions that we have begun asking our servicers in detail,” Dugan said.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, who has been pushing for fast and systematic loan modifications, said regulators need to examine re-default data more closely.

“I think it’s very important to look at this data carefully and know what it says and what it doesn’t say,” Bair said.

Dugan said the third-quarter report will show many of the same disturbing trends as other recent mortgage reports, as credit quality continued to decline across the board and delinquencies rose for subprime, alt-A and prime mortgages.

He said the report will also show that the greatest delinquencies were in prime mortgages.

I can tell you exactly what the answer is. You do not hand out mortgages to people that you know damned well that they cannot pay for them. That is the answer! This is why the Country, The Big Three and Wall Street are in the mess that they are in now, in the first place. Because fucking Bill Clinton and his team of morons decided to FORCE lending companies to gives loans to HIGH RISK persons, and they’re called that for a reason, they’re known not to pay their bills!

High Risk is called High Risk for a reason! Duh! Man, I could have told them that and I am a High School Drop out with A.D.H.D. 🙄

“Clue needed on Asle 5, Clue needed on Asle 5 Please.”

(Thanks Q & O)

Alfonzo on The "Declaration of Dependence"

An Excellent Video:

Now, towards of the end of this. He gets off into the weeds about the Unions. I’ll give him a pass on it. Because some of the stuff he says, I kind agree with. But he went overboard with the “They should gotten out from under them years ago…” I disgree with that crap. But the rest of the video is right on point.

Of course, if I was a real butt hole, I could say if it weren’t for the Democrats, his black ass would not have half the freedom that he has now. But to counter that, If it were not for Abe Lincoln, he would be still in chains. So, it evens out. 😀

Still I wish there were more black people, like Zo here who believed this way. But unfortunately most of them got sucked into that stupid socialist identity politics crap. Thanks to tools like Al Sharpton and Jesse Jackson.

Good show Zo, as always man. 😀

The High Price Tag of Nationalizing of America

Seeing I seem to be talking out of both sides of my mouth today. I give you some sobering news.

Want to know how much the bailouts are totally up to be? 700 Billion? That’s an old number now. Very old.

Try 8.5 Trillion. 8.5 flipping TRILLION BUCKS! …and for what? So some Wall Street Investment banks would not go out of business!

The L.A. Times has the story: (Thanks to Reason Hit & Run)

Indeed, analysts warn that the nation’s next financial crisis could come from the staggering cost of battling the current one.

Just last week, new initiatives added $600 billion to lower mortgage rates, $200 billion to stimulate consumer loans and nearly $300 billion to steady Citigroup, the banking conglomerate. That pushed the potential long-term cost of the government’s varied economic rescue initiatives, including direct loans and loan guarantees, to an estimated total of $8.5 trillion — half of the entire economic output of the U.S. this year.

Nor has the cash register stopped ringing. President-elect Barack Obama and congressional Democrats are expected to enact a stimulus package of $500 billion to $700 billion soon after he takes office in January.

The spending already has had a dramatic effect on the federal budget deficit, which soared to a record $455 billion last year and began the 2009 fiscal year with an amazing $237-billion deficit for October alone. Analysts say next year’s budget deficit could easily bust the $1-trillion barrier.

[…]

But even deficit hawks such as Walker acknowledge that the immediate crisis is priority No. 1. Just as with World War II, the government can worry about paying the bills once the enemy is defeated.

“You just throw everything you have at the problem to try to fix it as quickly as you can,” said David Stowell, a finance professor at Northwestern University’s Kellogg School of Management. “We’re mortgaging our future to a certain extent, but we’re trying to do things that give us a future.”

Washington could wind up spending substantially less than the sum of the commitments. Though the total estimated cost of the government’s efforts adds up to $8.5 trillion, only about $3.2 trillion has been tapped, according to an analysis by Bloomberg.

And not all the money committed is direct spending. About $5.5 trillion in loan guarantees and other financial backing by the Federal Reserve is included in the total.

“The only way those commitments would become obligations would be if the economy completely collapsed, in which case it’s a whole new ballgame anyway,” said John Steele Gordon, a business and economic historian.

Here’s why this even remotely bothers me. Because I, and everyone that reads this Blog; Your and My (if I ever have any) Children, their Children and their Children’s Children will be paying for this damn tab. Because our Government decided to prop up some banks that fund our stock market. All so Clinton could float some loans to high risk customers.

Now for the problem, that’s related to this.

It is official, we’re in a Recession!

CNN Reports: (H/T Meme)

The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .

The NBER is a private group of leading economists charged with dating the start and end of economic downturns. It typically takes a long time after the start of a recession to declare its start because of the need to look at final readings of various economic measures.

The NBER said that the deterioration in the labor market throughout 2008 was one key reason why it decided to state that the recession began last year.

Employers have trimmed payrolls by 1.2 million jobs in the first 10 months of this year. On Friday, economists are predicting the government will report a loss of another 325,000 jobs for November.

The NBER also looks at real personal income, industrial production as well as wholesale and retail sales. All those measures reached a peak between November 2007 and June 2008, the NBER said.

In addition, the NBER also considers the gross domestic product, which is the reading most typically associated with a recession in the general public.

Many people erroneously believe that a recession is defined by two consecutive quarters of economic activity declining. That has yet to take place during this recession.

So, the Government throwing all this money and bailing out everyone under the sun, except many the industries that need it, like the Auto sector, was a good thing to do, right?

Uh. No.

The financial market and credit crisis worsened during this summer, prompting Congress, the Treasury Department and the Fed to pump trillions of dollars into the economy through a variety of programs, including a $700 billion bailout of banks and Wall Street firms and hundreds of billions of lending by the Fed to major companies and lenders.

But Lakshman Achuthan, managing director of Economic Cycle Research Institute, said that at this point, the only solution for the recession is time.

“All the hand waving and real cash that policymakers are throwing at the problem won’t change the fact we’re stuck in this nasty recession,” he said. “The ultimate cure of a recession is letting it run its course.”

Achuthan’s research firm tracks weekly leading economic indicators that are supposed to signal a change in direction for the economy four or five months ahead of time. Those indicators are continuing to fall at a record pace.

Still, he said he’s not worried about the current recession turning into a depression, as many Americans fear.

“Even with indicators in a tailspin, this still is only a very severe recession,” he said. “There’s lots of gloom, but we don’t see doom.”

Of course, he did not use the word “Depression“, because he did not want to trigger a massive panic on wall street. But the truth and the reality is, that we are on a slippery slope to a depression. The difference between the two is this; The Depression of the late 1920’s and early 1930’s was caused by foolish investors, who basically “Bet The Farm” on a Wall Street bubble, and when that Bubble burst, those people lost it all. This time the depression or recession was caused by a Liberal President who forced an agenda, of giving loans to high risk recipients. When those recipients defaulted, because of a downturn in the economy, those loans went into default. When this happened, our Liberal Congress basically start plugging the holes in the sinking boat, or in this case, began pouring water into the bucket, but the bucket is full of holes; it works for a second, but the water does eventually run out.

The differences are night and day. There are no easy solutions, I wish that there was an easy solution, but most of it goes over my head. How this situation affects me is this; Jobs here in Michigan are scarce. This only compunds that sitution. A full scale depression only makes the prospects of getting another job even worse. It is not a pretty picture, but it is one that is very well rooted in reality.

Thank You for your support

The Following was made by me. It is my feelings towards those who opposed and still oppose the help that the Detroit Auto Industry needs. It might cost me readers, but it is how I feel.

I declare this photo PUBLIC DOMAIN. Feel free to copy it and post it to your Blogs.

Update: I posted this for one reason and one reason alone, Washington D.C. will hand over 4 BILLION dollars to Wall Street banks and not even flinch, but when Detroit needs help, they are like “You need a plan.” I am not saying that the companies are not at fault. But it just strikes me as pretty damned funny that Wall St. Gets that help and Detroit gets told to go fuck themselves, in essence. So, Yeah, I’m a little pissed off and a bit jaded at this point. Can’t you tell??!

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